A SUMMARY OF WHAT’S IN THE MAJOR U.S. NEWSPAPERS / Will Crisis Destroy the EU?

The New York Times and Washington Postlead, while the Wall Street Journalgoes high, with word that the federal government will provide American International Group with access to an additional $30 billion as part of yet another attempt to save the ailing insurance giant. It marks the fourth time that the government has stepped in to rescue AIG and “represents a nearly complete reversal from the one first laid out in mid-September,” notes the WSJ. At first, the government seemed intent on making sure AIG paid high interest rates for the taxpayer funds, but now those dreams seem to be over, and officials have concluded the insurance company is so intertwined with other parts of the financial sector that its collapse would be much more expensive in the long run.

The WSJ leads its world-wide newsbox, and the NYT off-leads, with European Union leaders rejecting a call by Hungary for a large bailout of Eastern European countries. The global economic crisis “poses the most significant challenge in decades” to the European Union’s “ideals of solidarity and common interest,” declares the WSJ. The Los Angeles Timesleads with supermarkets accusing some of the largest food manufacturers of continually increasing prices despite the sharp drop in the prices of commodities. Grocery stores say these rising prices are leading customers to discount stores such as Wal-Mart. The manufacturers reject the idea that they’re overcharging for their products and contend that just looking at the dropping prices of raw goods simplifies a complicated and volatile situation. USA Todayleads with word that the Environmental Protection Agency will begin to investigate air pollution outside schools across the country. In December, USAT analyzed government data to examine the effect of industrial pollution and identified 435 schools that appeared to have dangerous levels of toxic chemicals in the air around them.

AIG is widely expected to report that it lost somewhere in the neighborhood of $60 billion in the fourth quarter of 2008, the biggest quarterly loss in corporate history. Faced with a loss of that magnitude, credit-rating agencies probably would have downgraded AIG, which would have forced the insurance giant to default on its debt. AIG is not expected to access the $30 billion right away, but credit-rating agencies said they wouldn’t downgrade the company if it had access to the government cash. AIG now has access to $70 billion from the Troubled Asset Relief Program, making it by far the biggest beneficiary of federal largesse. And no one expects the fourth time to be the charm. Federal officials are largely expected to continue working with AIG to help the company get rid of some of its assets.

In addition to the extra money, AIG would essentially be allowed to stop paying dividends to the government, and the interest rate on all remaining debt would be cut to help the company reduce its losses. Also, instead of paying back $38 billion to the Federal Reserve, AIG will convert that debt into equity stakes in two of the company’s units that sell life insurance abroad and are doing relatively well. In an effort to reduce its debt further, AIG will package $5 billion to $10 billion of its domestic life-insurance business into new securities that would be given to the government, which could either hold them or sell them to investors.

If you’re still confused about what AIG did and why federal officials are doing everything possible to avoid its collapse, the NYT‘s Joe Nocera did an impressive job of breaking it all down into an easy-to-understand narrative in a piece published Saturday.

German Chancellor Angela Merkel led the opposition to Hungary’s call for a large bailout of the European Union’s newest members, which have been particularly hard-hit by the crisis. “Saying that the situation is the same for all Central and Eastern European states, I don’t see that,” Merkel said. Hungary’s prime minister had asked for a package worth up to $241 billion and warned that without it there could soon be a “new Iron Curtain” that would once again divide East from West. Several Eastern European leaders also want it to be easier to adopt the euro, but members of the old order aren’t too keen on the idea. Leaders left the Brussels summit without any concrete decisions and several Western officials insist the Eastern countries that are in deep trouble should look for help from the likes of the International Monetary Fund. “The European Union will now have to prove whether it is just a fair-weather union or has a real joint political destiny,” a German journalist tells the NYT.

In a front-page dispatch from Ukraine, the NYT all but declares that a country “once considered a worldwide symbol of an emerging, free-market democracy that had cast off authoritarianism” is ready to explode. The country’s economy has been steadily collapsing, there are rumors of a government default, and violent protests seem inevitable. World leaders are worried that an economic catastrophe in the country of 46 million people would be felt across Europe and might destroy a delicate balance of power if neighboring Russia tries to insert itself into Ukraine’s affairs. “A small country like Latvia or Iceland is one thing,” explains the NYT, “but a collapse in Ukraine could wreck what little investor confidence is left in Eastern Europe.”

Just because President Obama refused to receive money from political-action committees during his campaign doesn’t mean that they weren’t active. USAT reports that PACs spent a record $416 million on the election, and 175 members of Congress received at least half their campaign contributions from such groups. Ethics watchdogs say these contributions could end up shaping Obama’s proposals, particularly as lawmakers discuss them in Congress.

In the NYT‘s op-ed page, David E. RePass writes that if Democratic senators really want to help Obama get his agenda through Congress, they should get rid of “one of the greatest threats facing effective governance—the phantom filibuster.” Although most think that going through with a filibuster involves taking the floor and speaking nonstop for hours, the truth is quite different. Now, the mere threat of a filibuster is treated like the real thing. This means that the minority essentially has veto power, which is “clearly unconstitutional.” In order to end this practice, all Senate Majority Leader Harry Reid would have to do would be to challenge Republicans actually to go through with their threats. Once they’re faced “with the daunting prospect of having to mount a real filibuster to demonstrate their opposition,” he writes, “Republicans may become much more willing to compromise.”